Central Bank confident on growth, warns of cryptocurrency risks
Sri Lanka’s Central Bank Governor Dr. Nandalal Weerasinghe has assured that the country’s monetary policy framework under the International Monetary Fund (IMF) remains flexible and tailored to local economic needs, while also clarifying the legal grey areas surrounding cryptocurrency.
Speaking at the Central Bank’s monetary policy review media conference on Wednesday, Dr. Weerasinghe stressed that the IMF does not dictate a rigid inflation target for Sri Lanka. Instead, the Fund provides a consultative framework with a tolerance band of ±3 percent around the inflation goal.
“In Sri Lanka, our commitment is to maintain inflation at 5 per cent, with a margin of 1-2 per cent on either side. If we fail to meet this, we must report to Parliament,” he explained. By contrast, under the IMF framework, consultations are only triggered if inflation breaches the upper or lower limits.
He cautioned that the absence of regulation is risky, especially regarding virtual assets and money laundering. “The issue is, we don’t know if it’s used for money laundering,” he said.
He disclosed that new legislation is being drafted to place virtual asset service providers under the scrutiny of the Financial Intelligence Unit (FIU). The expected regulations would mandate virtual asset service providers to register with the Central Bank and provide transaction information to avert misuse.
The Governor’s statement follows growing public discussion on virtual assets, driven by the recent revelation that Trade and Commerce Minister Wasantha Samarasinghe holds cryptocurrency, as seen in his declaration of assets to the Commission to Investigate Allegations of Bribery or Corruption (CIABOC).
Despite all these controversies, Dr. Weerasinghe reiterated that Sri Lankans already have a number of regulated investment avenues like treasury bills, the Colombo Stock Exchange, gems and jewelry, and casinos all under anti-money laundering rules.
While inflation eased, growth picked up and new regulations are on the way, the Central Bank expressed optimism in its ability to guide Sri Lanka towards stability while tightening regulation on emerging financial risks.
Answering a question raised by a journalist on cryptocurrency, Dr. Weerasinghe clarified that while digital currencies cannot be used for payments within Sri Lanka, they are not illegal as an investment option. “Only the Sri Lankan Rupee can be used for transactions inside the country even US dollars require special permission,” he noted. “Cryptocurrency is not recognised as legal tender here, but it can be held as an asset.”
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